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Saturday, July 28, 2012

Seeing the erred ways of my thinking... (5)

It pains a bit to think of that now but --- I thought, until he retracted the referendum, that Mr. George Papandreou was the best Prime Minister which Greece could have in these difficult times. Why could I err so much in my thinking?

When someone - be that a person, a company or a state - is in financial trouble and needs help to solve his financial problems, there is one ingredient which is more important than anything else --- credibility! The counterparties must get the impression that they are dealing with serious people; people who have a sincere desire to solve the problems; people who know how to handle themselves professionally and who come across decently; people who don't play games and who don't try to pull fast ones.

When Mr. Papandreou came to the scene (and to me he only came to the scene after the financial problems had erupted), I was most impressed by how he handled himself and how he represented Greece and Greeks. To put it bluntly: I would have bought a used car from him.

Why? Probably because he came across so cosmopolitan; so charismatic in his demeanor (at least on the international scene). To me, Mr. Papandreou
easily outclassed the people sitting with him at the same table in
Brussels and/or other European capitals. He once gave a speech in Germany where Ms. Merkel and the head of the German Industrial Association
also spoke. The latter came across like a German professor from the
text book; Ms. Merkel came across as the "Mutti" that she is perceived as;
and Mr. Papandreou was the "sir". A German journalist commented with a
strong German accent that Papandreou spoke “good English”. Hey, great
observation!

I did not expect Mr. Papandreou to know how Greece's problems could be solved but I did expect that he would surround himself with the best possible advisors from the entire world to help him --- and to listen to them. And I felt certain that he was doing that.

My enthusiam for the person led me to write him a letter. Then another letter. And then another one. In one letter I warned: "Then
comes the population’s outcry 'we have had it; no more of this!'. And
then, I am afraid to say, even you and your government will find out
that you have had it".

I was enthusiastic when he came up with the idea of a referendum, not because of a referendum being a good idea but, instead, because of its being an excellent negotiating instrument. Before he went to Cannes, I asked whether Mr. Papandreou would turn out to be "a Mrs. Thatcher" or just "the son of his father". Sadly, he turned out to be just the son of this father.

Moral of the story

People don't always turn out to be what they seem to be. In assessing the competence and qualifications of a political leader, one should be more driven by the brain than by the heart.

The final question

EU-leaders must have noticed that Mr. Papandreou was not a Mrs. Thatcher. While it was obviously easier for them to negotiate with a son of his father, did they really expect that someone who is but the son of his father would be capable of leading his country into a new future?

12 comments:

"He once gave a speech in Germany where Ms. Merkel and the head of the German Industrial Association also spoke. The latter came across like a German professor from the text book; "

Yes, in Greece, the people who write the speeches for the politicians, are called "logografoi" and usually are carefully picked. The more incompetent the politician, the more carefull is the logografos picked. Mr. Papandreou had Prof. Varoufakis for a period as his logografos. So you understand how much incompetency we are speaking about.

At least his father was able to speak without written text. Mr. Papandreou was impressing in english, because it was practically his native language. In greek he was a disaster. He could rarely speak more than 1 minute without making a mistake. This was including reading text.

But the people voted him because of the sentamentalism in PASOK, of his surname. Even though he became leader of PASOK in an election with only one runner, himsef. In their minds it would be like resurrecting Kreiskandreou. Mr. Papandreou was maybe a novelty to you, but in Greece he had been a minister in various ministries in his father's goverments, where he presents nothingness or disasters as work. But,as i said, Greek voters were sentimentalists and they also believed his lies.

Even now, that his "collaborators" try to say that Mr. Roumeliotis didn't inform him, shows how little of a political man he is. First, it is inconceivable that a greek goverment wasn't in touch with her IMF reppresentative. Second. Mr. Papadreou had a long standing personal friendship with Dominque Strauss-Kahn, both being socialists and Mr. Papandreou president of "Socialist International". This is why Mr. Papandreou contacted in secret mr. Strauss-Kahn and to everyone's surprise, this contact remained in deed secret for as long as mr. Papandreou wanted, instead of being leaked to Brussels. So it is laughable to try to defend Mr. Papandreou by theorizing that Strauss-Kahn wasn't telling him his fears and his advice on debt-restructuting.

But exactly, the difference between a good politician and a puppet, comes at the big time, when you must face yourself and weigh yourself with history. Mr. Papandreou failed miserably.

He did hire foreign advisors, from US, Australia, etc. But it didn't seem to do him any good. He ignored Strauss-Kahn's advice too as Mr. Roumeliotis says. At the end, nobody will save you from your own inadequacy and fear. Mr. Papandreou was thinking only on how he will retain the chair. Even the memorandum, was made not when he should have done it (before accepting the terms of the memorandum), but when it was obvious that he was about to fall. The referendum was his last gamble, to win a "yes", that would allow him to stay in power, even though it was obvious that the people were regarding him as incompetent. His own parliamentarians were regarding him too, this is why they were resigning one after the other.

His incompetence was also shown by his choice of key ministers. He put as ministers a bunch of friends of his, some of which were simply his "gym friends" (literally), with no previous political experience. Even Mr. Papakonstantinou, with Phd from LSE, other than partecipating in sit-ins with the trade unionists in DEI, when they were striking and occupying the DEI buildings, had no previous experience as minister of economics and did quite a blunder. Most notably, with the "taxation reform" he made, he managed to return to the tax evaders 1 bln euros of free money!

The EU leaders have known what a moron Mr. Papandreou was, since he was minister of foreign affairs in his dad's goverment and mr. Simitis' goverments. Only a moron would sign on behalf of the greek state, the Dublin II treaty, which has all the prerequisites to become a bomb in the fundaments of the greek society.

Mr. Papandreou is currencly invited to Harvard to give lectures on how Europe and Greece can exit the crisis. The Americans have a sense of humour :))) Maybe they should call him to lecture on "what not to do if your country is about to go bankrupt. A first hand account of a man who knows".

Another hilarious part is in recent interview where Mr. Papandreou, the man who imposed to his country a mad program without having legitimate mandate and who didn't have the courage to carry a referendum and instead accepted the questions of his referendum by foreigners, said, that he would like to make a school for "the democratic formation of political leaders". Yes, call mr. Papandreou to teach about democracy... One that has raped it, is an expert on how to preserve it.

This is just one of the many videos that show how Greece had no chance of Mr. Papandreou handling the case.

It is Easter. Mr. Papandreou, due to tradition, is forced to make an appearance to the church. Now, since it is easter, the ceremony requires that you hold a candle for long time and if it is Friday, you must follow a route through the streets. In any case, holding a candle in these conditions, brings 2 problems: a) If there is wind, it will put off you candle and b) you will be constantly burning your fingers.

So, the solution is a the "candle cup". These are plastic cups, that are designed to fit and stay on position for the candle, so that the flame won't be put off by wind and you won't burn your fingers.

http://www.youtube.com/watch?v=s-DC8M2pakA

Everyone has his candle cup, but not Mr. Papandreou! Did someone forget to give the PM his candle cup?? Heaven's no! Simply, mr. Papandreou, apparently never understood its purpose, so he put it on the candle stand and instead, he took a normal candle without candle cup for the long ceremony...

At the time it was a joke for most Greeks, just like his inability to speak greek in a coherent manner for more than a minute. Alas, it was no funny. And as Prof. Yannaras once said "it is painful, and i say it with pain of soul, not because i want to degrade anyone, but in the 60s,if a politician would come and say pubblically, "zero on the hat", the day after he would have vanished. He has no justification. And please don't tell me "you know, he didn't live in Greece, he had foreign parents, his parents were in exile. All this doesn't justify that the people tolerate that someone who is linguistically de-hellenized, has the responsibility for the fate of this historic nation. I think that anyone can agree, that a man without language, means man without thought. Either we like it or not, we think using words".

"If the proposal of Strauss-Kahn, which i repeatedly conveyed to Athens for haircut of the greek debt before entering the memorandum, had been accepted, now the greek debt would have been 80-90% and the program that Greece would have had to follow, would have been radically different from that enforced and with which the country is living to this day.

But alas, Mrs. Merkel was too strong and threatening for mr. Papandreou to stand... But it could have been worse. Mrs. Merkel could have given to mr. Papandreou a 1 or 2 year plan! I am sure he would have accepted. So, not all is black.

Greece should default and get over it. Already the goverment has breached anything mr. Samaras was saying before the elections.

Enough with this charade. At least it will give the german politicians someone else to do every day.

In any case, a haircut will come. If we wait again for someone else to decide when and how much, all the worse for Greece. It's time greek politicians started acting for the benefit of the country. The borrower must start acting like a borrower in this game.

According to how things go, Mr. Papandreou may follow his father's footsteps as the 2nd PM to be tried by Special Court. Although i doubt he will stay, he will rather fly to Berlin and ask from Mrs Merkel political asylum and join mr. Christoforakos in the team of "self-exiled Greeks in Germany".

Bandolero.

P.S.: In Greece it will be worse than in Argentina, because the politicians have said so many lies and breached so many times democratic rules, that it will be very ugly.

Saying the basics. You may ask, where was Mr. Papandreou when he was saying that? Knowing mr. Papandreou, he probably had skipped class to go canoeing or running. So he didn't attend to the relevant lessons.

Of course, we are talking about a man, who believed, that a rubber "biomagnetic" wristband around your wrist, will "react with your biological system, cleaning all pathways from interference, maintaining maximum energy flow".

A bit later, the company that Mr. Papandreou believed, came up with a pubblic statement:

I have watched the Wolff-video. Yes, there are a lot of messages in it which Papandreou should have been aware of but he shouldn't have gotten his council from Wolff but rather from people who have been involved in sovereign debt negotiations. I had always recommended Bill Rhodes (see my posts). Why? Because Wolff tends to put it into the context of a class struggle whereas this has absolutely nothing to do with a class struggle. All it has to do with is how to do business prudently.

The simple formula is: when you owe the bank 100 Euros, you have to be nervous. If you owe 10 MEUR, the bank has to be nervous. Both sides have to be aware of this but never play the game like collective bargaining. The game needs to be played according to the (unwritten) rules of finance. It’s not “I’ll make you a deal or else”. Instead, it’s “We are making a proposal to you which serves your interests and ours”.

I don’t know whether you have read my letters to Papandreou. The first mistake he made, and Bill Rhodes had warned him of that, was not to assume the position as the one who is driving the show; who calls the shots. From that moment on he had lost; not only with the Troika but – more importantly – with the Greeks.

The next mistake was to go immediately to the EU. When you have a problem, you have to talk with your creditors directly and remind them that more than anything else, credit is an issue between lender and borrower. The moment lenders see that governments are getting involved, they start jockeying for a bail-out. They will renegogiate reasonably only as long as there is no prospect of a bail-out. Had Papandreou gone to the IMF, they would have told him that. In fact, they would have acted behind the scenes to organize that.

Where Papandreou was 100% right was when he emphasized that “Greece will repay every penny of its debt”. Everyone knows that this would never happen but the rules of the game are that you have to go through the motions. That’s what Wolff called the “theater”.

Once you have sworn to everyone that Greece would repay every penny of its debt, you proceed with your proposal which shows – in a hidden way – how Greece won’t (because it can’t). You offer the creditors, certainly for 100% of the debt, new repayment terms which go into the next generations. However, the debt remains formally in place so that “every penny of it can be paid”. And then you have to propose an interest payment structure which does not place excessive burden on the budget.

Everyone would say “but the creditors would never accept that!” Well, those people should watch the Wolff-video. The creditors will always accept it if it is presented within the rules of the game, if it makes some good sense and if they get “forceful persuasion” from governments acting behind the scenes. I should add: unilaterally calling recently concluded agreements null and void is not within the rules of the game. I once wrote a post arguing that Greece had the stronger hand.

http://klauskastner.blogspot.co.at/2011/06/who-will-blink-first.html

If not watching the Wolff-video, Papandreou should have watched the original Godfather movie. The debtor never threatens not to pay. Instead, he makes his creditors an offer which they can’t refuse.

Again, to put in into terms of a possible European-wide class struggle is a bad idea because it has nothing to do with classes. It has everything to do with prudent sovereign debt negotiation.

PS: I just saw that already over one year ago I had first written about this to Mr. Papakonstantinou. What I proposed about the debt has evolved since then a bit but the basics still apply.

I only used Wolff, because he happened to be mr. Papandreou's professor... He puts everything into a class struggle basis, because he is neomarxist after all...

But in the first part of the video, explains the things that normally one should know on his own, but sometimes he doesn't.

Once you have grasped what's your supposed role, then you can find the advisors on how to do it. Strauss Kahn himself, as is now revealed, was advicing mr. Papandreou to do the right thing.

Now, you may prefer evergreen bonds rather than haircut (mr. Roumeliotis uses haircut in today's article), but the basis remain the same. Either way, given the deficit that Greece was running, it would keep her out of markets for many years.

I think that creditors would much more like the evergreen than a haircut! More "uruguaian" solution.

Mr. Papandreou, believed in a naive way, that somehow there would be a "political solution", since Greece was EU member. At least this is what i 've understood from all that he has said. But, here we 're talking about banks and money. Banks are not his partners. Investment funds are not his partners either.

The problem is that as many other greek politicians, they don't have much experience in real life. Issues like that happen every day between businesses and bank loans. Everyone at the end has an interest in making a compromise instead of losing everything.

Today Greece is probably trapped and the current goverment has the same mentality as Mr. Papandreou. "Whatever Germany decides". Greece is probably trapped, from clauses in the memorandum and english law in the PSI new bonds. Back in the start, all bonds were under greek law, you could do whatever you liked with them with very little chance of the creditor to have any legal chance against you.

I have not yet clear image of how the current legal situation is. Some theorize that we are trapped in the euro.

Experience with successful sovereign debt reschedulings (via evergreen bonds, long-term new bonds, capitalized interest, whatever) shows that once a country's debt has been "regularized" and a new economic plan is in place (and the plan is credible...), countries can return to markets VERY quickly. Some even within less than one year.

Take any big debt crisis; NYC, California, a Latin country, whatever. When the crisis erupts, the end of the world seems near. Will NYC go bankrupt or not??? Once the debt is "regularized", i. e. restructured/rescheduled, the crisis is forgotten. Period.

Was California in better financial condition the day after it had "regularized" its debt? Not at all! But markets had the confidence that, with the new plan, California would eventually get into a better financial condition. See you the next time...

I have been fooled by Papandreou, too. To me, it looked like he had the right ideas, was much more modern and realistic than other Greek politicians, and did represent his nation in the negotiations very well, regarding the very difficult circumstances. However, in hindsight, and knowing more about his administation now, it may very well be that he was just an empty suit. One thing's for certain, a crisis manager, capable of handling this critical situation, he wasn't. Not even remotely.

But much more than his alleged failures in negotiiating about the debt issue (yoour points make a lot of sense) I see his total lack of power to enforce any reforms that would have made Greece more competitive as the critical point. It was his job to come up with a big crisis program, to remove roadblocks for job creation, to fight corruption and tax evasion (especially as a SOCIALIST politician!), to get unions and employers at a round table, to get his population behind a big effort to modernize Greece ("CHANGE!" still sounded good in 2009!). He failed on all these points, it doesn't even look as if he tried. Like most other Greeks, he apparently believed the help had to come from outside and that there was no urgent need to make systemic changes to the system. Really, did he come up with a single, serious intitiative of his own? I can't remember any. And that sealed the fate of Greece.

Now, decisive action on day one would have made a difference. Successful revolutionaries (and it would have been a revolution for reform allergic Hellas, no doubt) rush to make big, brutal changes at the very start in order to overcome the opposition and to get into calm water as soon as possible. Piecemeal reforms stir up those waters time and again and will exhaust both the reformers and the people. Papandreou wasn't bold enough for this, and he probably lacked the support for such wideranging actions, too. And Samaras isn't much better, if at all. As a consequence, here we are, three years after the shit had hit the fan, and it still looks as if the systemic modernisation of Greece hasn't really started yet.

Let's face it, there isn't even popular support for a big overhaul. Instead, most people are pointing at the Troika, as if they could magically turn a screwed up nation into a heaven of prosperity, despite huge resistance from powerful forces that have a selfish interest in preserving their privileges. It's hopeless, really, and imho any optimism is simply delusional. Nothing will change because the minds haven't changed yet. That's the sad reality.

I agree with what you say. In the final analysis, it always comes down to leadership. Steve Jobs was certainly not the kind of leader that I would want to work for but from the biography about him, I would say that Apple owes its today's existence and prominence to this man. Without Churchill, WW2 would have taken different turns. Without a very competent state government for some time, Bavaria would have remained a recpient of domestic transfer payments instead of becoming, by far, the largest net payer today.

I have just finished another book on modern Greek history. It seems to me that Greek society always preferred leaders in the German sense of the word "Führer". In short: populists with whatever intentions. Greece hasn't really had so many leaders in the American sense, i. e. people who can really drive a country towards a better tomorrow.